Understanding the Competitive Environment
- Competition occurs when at least two businesses are providing goods/services to the same target market
- The more businesses in the market, the more intense the competition
- The more businesses in the market, the more intense the competition
- Competition can be direct or indirect
- Direct competition occurs when the business is targeting customers with exactly the same product as a competitor
- Indirect competition occurs when firms sell different products but compete with each other for the customers disposable income e.g. cinema's and theatre companies are in indirect competition
- Competition results in many benefits for the customer, such as
- Businesses offer lower prices
- Businesses produce better quality products
- Businesses provide better customer service
- However, the absence of competition reduces incentives for businesses to innovate, be efficient or offer consumers lower prices
- When judging the strength and weaknesses of competitors, businesses often assess their price, quality, location, product range and customer service
Assessing the Competition
Factor |
Strengths | Weaknesses |
Price |
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Quality |
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Location |
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Product range |
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Customer service |
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